With the highly unpredictable nature of life, you may find yourself in situations that require instant financial aid. At such times, availing a personal loan can be the right choice with its easy availability and low interest rates. While it is quite easy to avail a personal loan when in urgent need of money, it is equally important that you make the payments on time to ensure a healthy financial future. Know more about personal loan borrowing & related tips to ensure that you become a responsible borrower to be able to build a healthy credit score in this article.
What Is A Personal Loan?
A personal loan, like those you can compare at https://usave.co.uk/loans/, is an unsecured loan that does not require you to offer any security to the lender to avail the loan amount. This type of loan is offered based on your credit score and eligibility. Factors such as your credit score, age, income, employment status play an important role in helping lenders assess your credit eligibility. With digital advancement, one can now easily avail a personal loan online by applying with an online lender offering instant disbursal at low EMIs.
Tips To Follow To Responsibly Pay Off Your Personal Loan
1. EMIs Choose loan amount reasonably
Choose a loan amount only you can pay off. Every lender in India checks your repayment capacity on the basis of your income, employment status, current obligations, credit utilization and other factors. Your loan application would be rejected if you apply for a loan amount that you won’t be able to repay in the decided tenure with your monthly income.
2. Ensure your EMI does not exceed more than 10% of your income:
New-age technology has made it extremely easy for you to get a personal loan. However, it is a must that you keep in mind that your EMI payment towards personal loan taken does not exceed 10% of your monthly income. If you are paying a hefty EMI amount then your financial future can be at risk as you may not be able to save any money.
3. Do not default on loan payments:
It is important to know that if paid on time, personal loans can help you boost your credit score. Therefore, never miss out even on one single EMI payment as doing so can decrease your score and also make you liable to pay off heavy late payment fee. Remember, lenders in India provide your repayment record to credit agencies that record the number of defaults you make towards your loan and credit card bill payments.
4. Do not borrow to spend lavishly or even invest:
The lure to make quick money by investing in a financial product would make you want to borrow a personal loan. However, do not end up making that mistake as market conditions are highly unpredictable which could backlash your investment. Therefore, it is too risky to invest in a financial product with a borrowed money at a high-interest rate. It is best to get a personal loan to take care of a financial emergency or to finance a wedding, pay off education fee, hospital bills and others.
5. Opt for a personal loan protection cover:
Personal loans are now offered with an insurance cover that helps you repay the loan amount in case of death, unemployment or medical conditions. Thus, opting for this type of cover helps you ensure that you or your family can easily pay off the personal loan EMIs without having to worry about the repayment.
6. Look for other sources of income:
If you are unable to bear the monthly loan EMIs, then it is best you look for other sources of income such as a part-time job or freelance work related to your field. For instance, if you are a writer by profession then you can look for freelance jobs or part time jobs to support your monthly expenses and pay off the loan EMIs in an easy way.
Be A Responsible Borrower Of Loans
Getting a personal loan is a very convenient way to cater to your financial needs. Since this type of loan can be used to address any type of financial emergency, it is one of the top-selling loan products in India. However, not paying off the loan EMIs on time can damage your financial future in a big way as it can dent your credit score than can lead to rejection of your loan application from several lenders. Remember, credit score determines your credit worthiness-giving the lender an idea of your repayment history, credit utilization and others factors. Not having a good score can lead to rejection of the loan application or the approval of the same at a high interest rate. Generally, having a credit score of 650 is considered to an ideal score for getting your personal loan application approved.
